The Hollowed Out Middle
When in the moving people out of poverty business, it is important to also focus on the health and stability of the next rung of the economic ladder. Unfortunately, the middle class isn't doing so well. Check out this 2012 cartoon from Mike Smith:
So America took itself to the moon and then somehow let it's middle class fold, writes the Washington Post's Jim Tankersly, who tries to provide a little light on what happened:
That trouble started decades ago, well before the 2008 financial crisis, and it is rooted in shifts far more complicated than the simple tax-and-spend debates that dominate economic policymaking in Washington. It used to be that when the U.S. economy grew, workers up and down the economic ladder saw their incomes increase grow, too. But over the past 25 years, the economy has grown 83 percent, after adjusting for inflation — and the typical family’s income hasn’t budged. In that time, corporate profits doubled as a share of the economy. Workers today produce nearly twice as many goods and services per hour on the job as they did in 1989, but as a group, they get less of the nation’s economic pie. In 81 percent of America’s counties, the median income is lower today than it was 15 years ago.
In this new reality, a smaller share of Americans enjoy the fruits of an expanding economy. This isn’t a fluke of the past few years — it’s woven into the very structure of the economy.
Slate's Jordan Weissmann discusses the findings of New York University economist Edward Wolff on shrinking middle class wealth:
[S]etting aside arguments about inequality, there are lots of reasons to care about the net worth of the middle class. First, it gives families a financial cushion. Second, there's a documented "wealth effect" on spending—households are more willing to open their wallets when their home prices are rising and stock portfolio is flush. In other words, when the middle class feels wealthy, it's good for all of us.
In the Atlantic, Matt Philips discusses the waning economic mobility in the United States compared to its peer countries and blames education:
Not only is the U.S. now less equal than Europe is, its population is also less mobile than those in many of the continent's countries. In the late 19th and early 20th centuries, Americans had a much easier time rising above the class into which they were born than did their counterparts in Britain, according to economic historian Joseph Ferrie. Now, a poor Moroccan kid in France is much more likely to move into the middle class than is a child born into a poor family in Mississippi...
“Relative to 40 years ago, high-income kids are more likely to be surrounded by other high-income kids, low-income kids by other low-income kids,” Greg Duncan, an academic who has studied the interaction of income segregation and equality, said in a speech earlier this year.
Such socioeconomic sorting causes all kinds of problems. Some are related to the schools themselves—so-called school effects—in that institutions that tend to serve poorer kids typically offer lower-quality, insufficiently financed education options. But other issues transpire when school systems are segregated by class, too. Since children of low-income parents typically are less prepared for high school and get less guidance when preparing for college, these kids can benefit immensely from going to school with with kids whose parents are college-educated and know the ropes a bit better.
In cities across America, people continue to take to the streets to protest egregious use of force that have killed unarmed and in many cases completely innocent black men. The Washington Post's Courtland Milloy wants folks to ask their super wealthy friends what it will take for some outrage about economic inequality that is now leading to social unrest:
[A] police officer who can barely afford to pay a car note gets to drive a half-million-dollar military assault vehicle. And the penalty for being poor gets ramped up to homicide at the hands of some poorly trained, combat-minded cop. Do the super-rich ever wake up wanting to clue us in: Hey, black and white working class, can you stop harping on race long enough to see that you’re both being robbed blind? Or, is it just too much fun for rich folk to watch us arguing over whether a poor black man should have been killed by police for selling illegal cigarettes while ignoring the bankers who got away with billions in ill-gotten gains?
Criminalizing children instills a distrust for law enforcement early, and more cops in schools has meant more misdemeanor charges in lieu of visits to the principal’s office. Those trends also dramatically overcriminalize students of color – 70% of American students arrested for offences in school are black or Hispanic.
In Pacific Magazine, Michael Zukerman discusses how community courts are being used to lower both incarceration and recidivism rates, in part by treating people with more dignity. Check out this chart on how the United States is over-policing us:
Meanwhile, people are taking another look at so-called corporate welfare via tax breaks and whether it is impoverishing already struggling communities reports Shawn Escoffery and Greg LeRoy in the Chronicle of Philanthropy. They argue foundations and nonprofits should send comments to the government on a proposal to have governments disclose just how much revenue gets lost in these deals:
When a large company gets a multimillion-dollar deal boosting its bottom line, the taxes they are absolved from paying (think, more teachers, classrooms, road lanes, and trash pickups) must be shouldered by everyone else who must pay more. But because so little is known about these deals now, it is difficult to mobilize local residents to ask tough questions, debate whether they really like these deals, and perhaps put pressure on lawmakers to end them... Cities and inner-ring suburbs — those places that can least afford to do so — surrender a bigger share of tax revenue to companies than their wealthier neighbors. Perversely, communities that are home to people of color and immigrants, or those that have large numbers of jobless and low-income people, are the ones that most need government revenue for public services like schools, policing, transportation, and other critical services. But it hasn’t been possible to systematically examine spending patterns in cities across the United States in part because of the lack of disclosure requirements for corporate deals.
The New York Time's Robert Frank looks at a recent paper by two economists that found that "almost all of the increase in American inequality over the last 30 years is attributable to the 'rise of the share of wealth owned by the 0.1 percent richest families.' And much of that rise is driven by the top 0.01 percent." You might be interested in this report from the Robin Hood Foundation on "meeting the needs of low-income New Yorkers." In addition to the report, they have created an interactive with the data. Here's a screen grab:
You also should check out this New York Times slide show with aerial views of the damage done to Detroit. We have this Brookings' report on how the Earned Income Tax Credit use pans out by zip code. And the AP reports on why child homeless numbers have reached an all time high.
Disunited We Fail
Amazon workers lost their Supreme Court case on whether their employer had to pay them for waiting in line during mandatory security screenings. Here is how Businessweek's Josh Eidelson analyzed the ruling:
Unlike the meat workers’ tool sharpening or the battery workers’ safety showers, the court concluded, the security lines weren’t necessary to the warehouse workers’ jobs. In fact, Thomas wrote, Integrity “could have eliminated the screenings altogether without impairing the employees’ ability to complete their work.” So even if companies mandate that their workers wait in security lines, and bosses benefit from having the checkpoints, and they refuse to revamp them to make them more efficient, employees hoping to sue for better treatment are out of luck. If they want to make their bosses cough up cash for their time in line, they’ll have to find an alternate way to do it.
Over at Politico, Zachary Zarabell says we are not focusing on the right questions about what ails labor:
To ask whether the “job market has turned a corner” or whether “wages are rising” is to ask an inherently unanswerable question, or rather to ask a question whose answer will inevitably be only partly right at best and hence partly wrong. The reason is that “wages” and “jobs” are statistical categories that treat the entire economic system as one big unit, when in fact it is not and is arguably becoming less so. The economic system may be unitary, but that only serves to mask massive variations underneath. It’s not just that there is considerable variation in one’s employment prospects depending on age, race, demographics and especially education level. Those are vital. A college-educated woman has substantially better job opportunities than a Hispanic male with only a high-school diploma . Houston and Detroit are both metropolitan areas in the United States, but in terms of how they measure economically, they are about as similar as Nigeria and Norway.
Also being left behind in this economy are male workers between the ages of 25 to 54, writes the New York Times' Binyamin Applebaum:
Working, in America, is in decline. The share of prime-age men — those 25 to 54 years old — who are not working has more than tripled since the late 1960s, to 16 percent...
Many men, in particular, have decided that low-wage work will not improve their lives, in part because deep changes in American society have made it easier for them to live without working. These changes include the availability of federal disability benefits; the decline of marriage, which means fewer men provide for children; and the rise of the Internet, which has reduced the isolation of unemployment.
At the same time, it has become harder for men to find higher-paying jobs. Foreign competition and technological advances have eliminated many of the jobs in which high school graduates like Mr. Walsh once could earn $40 an hour, or more. The poll found that 85 percent of prime-age men without jobs do not have bachelor’s degrees. And 34 percent said they had criminal records, making it hard to find any work.
Meanwhile, the Upshot's Amanda Cox looks at what these guys do instead of work. Check out this chart:
In the Wall Street Journal, William Galston argues what really is causing friction for labor is shareholder value:
Few investments will produce high returns as fast as shareholders (especially activist investors) have come to demand. That is why businesses are hoarding so much capital—and using a record-high share of their earnings to buy back their own stock. And businesses have become more reluctant to invest in training their rank-and-file workers, in part out of fear that valuable workers will move and take their human capital with them, and in part in the belief that workforce training is the responsibility of the education system.
Over at Propublica, Jesse Eisenger looks at donor advised funds, which have "grabbed significant market share" and finds them wanting:
Even charity, like so many other corners of our economy, has come to be financialized. In some cases, it's literal. Charities are being run by for-profit financial firms. And take our most prestigious universities. It's become an oft-repeated argument that they have become hedge funds with tax-exempt colleges attached. But it is cultural, too. The values of the financial world have infiltrated the world of philanthropy. The charitable world has become obsessed with "metrics," as the jargon has it. Everything must be measured. One reason is that the super-wealthy increasingly come from the investment world, and not the industrial realm as in past eras, and elevate measurements over accomplishments.
In this new paper, Brookings' George Serafiem looks at how companies with strong sustainability models did relative to peers. Check out this chart:
Serafeim’s model breaks out future financial performance into four key sectors: health care, financial, technology and communication, and nonrenewable resources. Understanding the materiality of the different sustainability issues for different companies (and their respective sectors) seems to be an important factor for understanding the financial impact of these issues, he writes.
Is playtime over for impact investors? Check out this video over at Pioneers' Post on the latest GoodDeals conference? Meanwhile, also in Pioneers' Post is this interesting piece from Andrew Curtis and Tara Anderson, who "reflect on whether social innovation has lost its way as 'doing good' increasingly becomes a concept governments and corporates alike want to latch on to:"
Social enterprise was once a radical renewal movement within the third sector. Today, however, it’s not quite so straightforward. In March this year, Pamela Hartigan, director of the Skoll Centre for Social Entrepreneurship at Saïd Business School, summed it up when she said: “I am beginning to feel more and more uncomfortable with the term social enterprise. "I believe these terms were very important at one point in time, but right now, what I’m finding across the world is they continue to foster this notion that social entrepreneurship is synonymous with palliative band aid approaches, rather than about promoting disruptive business models and approaches that address the root causes of a problem.” Social enterprise was once a whole new way of doing business. It was radical, it pushed the boundaries, it generated new ideas and new solutions. But now it’s becoming part of the system. As Italian academic Flavia Martinelli also notes in her 2012 essay Social innovation or social exclusion: “The recent success of the notion and its mainstreaming in policy discourse has paradoxically emptied it of its innovative dimension, exposing it to the concrete danger of becoming hollow – or, worse, instrumental – rhetoric”.